Choice Institutional Equities has upgraded Centum Electronics to 'Buy' with a price target of Rs 5,150, following strong Q2 FY27 growth. While the company's order book remains healthy, investors are also monitoring the board's proposal to increase borrowing limits to Rs 1,000 crore.
Choice Institutional Equities has upgraded its rating for Centum Electronics to 'Buy', setting a price target of Rs 5,150. The brokerage’s outlook is driven by the company’s strong performance in the fiscal second quarter of 2027 and its growing order book in the defense and aerospace sectors.
Centum Electronics reported a standalone revenue of Rs 3,118.19 million for the quarter ended September 2026. The company’s profit after tax (PAT) saw a significant increase to Rs 228.12 million, compared to Rs 129.10 million in the same quarter of the previous year. This growth is being supported by the company’s focus on high-value segments like tactical air navigation systems and satellite payload electronics, which continue to form a key part of its order visibility.
Alongside the upbeat outlook, there are important financial items for investors to track. The company's board has approved a proposal to increase its borrowing limits from Rs 500 crore to Rs 1,000 crore, a move that is subject to shareholder approval. Additionally, the board has cleared plans to create charges on company assets to secure these borrowings. While increased borrowing can provide capital for expansion and fulfilling large orders, it also raises the company's leverage profile, which is a factor shareholders typically watch closely.
Analysts have noted that while the company's growth trajectory appears strong, it operates in a sector with inherent execution risks. Projects in defense and aerospace often involve complex engineering and long lead times, which can be sensitive to supply chain disruptions and raw material cost volatility. Some market observers have also raised questions regarding the quality of core earnings, specifically pointing to trends in interest coverage ratios and operating profit margins excluding other income. Maintaining these margins will be vital for the company as it scales up its operations to meet the growing demand for electronic manufacturing services.
Moving forward, the primary monitorables for investors will be the company’s ability to execute its current order pipeline efficiently and its management of the debt profile once the higher borrowing limit is approved. The company’s performance in the upcoming quarters will likely depend on its capacity to convert these orders into revenue without facing cost overruns or operational delays.